Negotiable Instruments

Negotiable Instrument is the name of a document that promises to pay a sum of money. The document states that the singer of the document agrees to pay the owner of the document a set amount of money which is also stated on the document.
On the back of an envelope, Phoebe writes, “I promise to pay Quint or bearer $600 on demand. [Signed] Phoebe.”
This instrument is a promissory note and a bearer note, and it is negotiable. A promissory note is a written promise made by one person (the maker) to pay a fixed sum of money to another person (the payee) on demand or at a specified future time. The maker of this note is Phoebe. The payee is Quint or bearer. A note that is payable to a specific payee or bearer is a bearer note.
A bearer is anyone holding something such as a check, promissory note, bank draft, or bond. This is important when the document states it is payable to bearer which means whoever holds this paper can receive the funds due on it. A negotiable instrument that is payable to bearer or to cash or to the order of cash that is not naming a payee, is a bearer instrument and is called bearer paper.
To be negotiable, an instrument must be written, be signed by the maker or drawer, be an unconditional promise or order to pay, state a fixed amount of money, be payable on demand or at a definite time, and be payable to order or to bearer unless it is a check.
This instrument meets all of these requirements. It is handwritten on the back of an envelope, which has permanence and is transferable. The maker signed it. Its payment is not conditional and includes the maker’s definite promise to pay. Also, “$600” is a fixed amount payable in money, and the instrument is payable on demand and to “bearer.”

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...TYPES OF NEGOTIABLE INSTRUMENTS
n Draft: An unconditional order to pay by which the party creating the draft (the drawer) orders another party (the drawee), typically a bank, to pay money to a third party (the payee) -- e.g., a check. n n n n Check: A draft ordering a drawee bank and payable on demand. Time Draft: A draft payable at a time certain. Sight Draft: A draft payable on presentment. Trade Acceptance: A draft that is drawn by a seller of goods ordering the buyer to pay a specified sum of money to the seller, usually at a specified future time. The buyer accepts the draft by signing and returning it to the seller.
n
Promissory Note: A written promise made by one person (the maker) to pay a fixed sum of money to another person (the payee) on demand or at a specified future time. Certificate of Deposit: A note by which a bank or similar financial institution acknowledges the receipt of money from a party and promises to repay the money, plus interest, to the party on a certain date.
1
n
NEGOTIABLE INSTRUMENTS: AN OVERVIEW
n A Negotiable Instrument is a: (1) written instrument, (2) signed by the maker or drawer of the instrument, (3) that contains an unconditional promise or order to pay (4) an exact sum of money (with or without interest in a specified amount or at a specified rate) (5) on demand or at an exact future time (6) to a specific person, or to order, or to its bearer.
2
NEGOTIABILITY: SIGNATURES
n For an instrument to be negotiable, it......

...NEGOTIABLE INSTRUMENTS ACT,1881
Definition of a Negotiable Instrument.
The law relating to negotiable instruments is contained in the Negotiable Instruments Act, 1881. It is an Act to define and amend the law relating to promissory notes, bills of exchange and cheques.
The Act does not affect the custom or local usage relating to an instrument in oriental language i.e., a Hundi.
The term "negotiable instrument" means a document transferable from one person to another. However the Act has not defined the term. It merely says that "A .negotiable instrument" means a promissory note, bill of exchange or cheque payab1e either to order or to bearer. [Section 13(1)]
A negotiable instrument may be defined as "an instrument, the. property in which is acquired by anyone who takes it bona fide, and for value, notwithstan~ing any defect of title in the person from whom he took it, from which it follo~s that an instrument cannot be negotiable unless it is such and in such a state that the true owner could transfer the contract or engagement contained therein by simple delivery of instrument" (Willis- The Law of Negotiable Securities, Page 6).
According to this definition the following are the conditions of negotiability:
(i) The instrument should be freely transferable. An instrument cannot be negotiable unless it is such and in such state that the true owner could transfer by simple delivery or endorsement and delivery.
(ii) The person who takes it for......

...THE NEGOTIABLE INSTRUMENTS ACT
AND
THE NEGOTIABLE INSTRUMENTS (AMENDMENT AND MISCELLANEOUS PROVISIONS) ACT, 2002
Negotiable instruments are of great importance in the business world and by extension in banking. They are instruments for making payments and discharging business obligations
What is a Negotiable Instrument?
The Negotiable Instruments Act does not define a negotiable instrument but merely states, “ a negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or bearer.” (Section 13). This section does not prohibit any other instrument that satisfies the essential features of portability.
Justice K. C. Willis defines these as, “ one the property in which is acquired by anyone who takes it bonafide and for value notwithstanding any defect in title in the person from whom he took it.”
Thomas defines it in his book “Commerce, Its theory and Practice “A negotiable instrument is one which is, by a legally recognized custom of trade or by law, transferable by delivery in such circumstances that (a) the holder of it for the time being may sue on it in his own name and (b) the property in it passes, free from equities, to a bona-fide transferee for value, notwithstanding any defect in the title of the transferor.”
It :
(1) entitles a person to a sum of money
(2) is transferable (by customs of trade) by delivery, like cash, or by Endorsement and delivery and delivery, and
(3) ...

...Negotiable Instruments
On the back of an envelope, Phoebe writes, “I promise to pay Quint or bearer $600 on demand. [Signed] Phoebe.” The type of instrument that is used in this scenario is a promissory note. When a promissory note is present, this is a written promise which involves two parties (Clark, Miller & Cross, 2014). The two parties that are present in a promissory note is the maker (payer) and the payee and the note may be made with a specific date mentioned or on demand-when the payee requests the money (Clark, Miller & Cross, 2014). In the scenario above, the maker is Phoebe and the payee is Quint and it the note is written to indicate that when Quint asks for the $600, Phoebe is to pay it at that time.
In order for a note (or any other instrument) to be negotiable it must meet all six of the following requirements. These requirements are (Clark, Miller & Cross, 2014):
1. The instrument must be in writing-Phoebe wrote the promissory note on the back of an envelope.
2. It must be signed by the maker (payer) or the drawer-Phoebe signed the note
3. It must be an unconditional promise to pay-there were no conditions set by Phoebe that may hinder Quint from requesting payment (i.e.-I, Phoebe, will pay Quint the $600 if he calls me no later than noon on the day he requests payment)
4. The note must state a fixed amount of money-Phoebe’s promissory note listed $600.
5. The note must be payable on demand or at a definite amount of......

...In India, there is reason to believe that instrument to exchange were in use from early times and we find that papers representing money were introducing into the country by one of the Mohammedan sovereigns of Delhi in the early part of the fourtheenth century. The word 'hundi', a generic term used to denote instruments of exchange in vernacular is derived from the Sanskrit root 'hund' meaning 'to collect' and well expresses the purpose to which instruments were utilised in their origin. With the advent of British rule in India commercial activities increased to a great extent. The growing demands for money could not be met be mere supply of coins; and the instrument of credit took the function of money which they represented.
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...Petitioner, v. THE COURT OF APPEALS, Respondent.
EN BANC
[G.R. No. L-2516. September 25, 1950.]
ANG TEK LIAN, Petitioner, v. THE COURT OF APPEALS, Respondent.
Laurel, Sabido, Almario & Laurel, for Petitioner.
Solicitor General Felix Bautista Angelo and Solicitor Manuel Tomacruz, for Respondent.
SYLLABUS
1. CRIMINAL LAW; ESTAFA" ; ISSUING CHECK WITH INSUFFICIENT BANK DEPOSIT TO COVER THE SAME. — One who issues a check payable to cash to accomplish deceit and knows that at the time had no sufficient deposit with the bank to cover the amount of the check and without informing the payee of such circumstances, is guilty of estafa as provided by article 315, paragraph (d), subsection 2 of the Revised Penal Code.
2. NEGOTIABLE INSTRUMENTS; CHECK DRAWN PAYABLE TO THE ORDER OF "CASH" ; INDORSEMENT. — A check payable to the order of "cash to the person presenting it for payment without the drawer’s indorsement.
D E C I S I O N
BENGZON, J.:
For having issued a rubber check, Ang Tek Lian was convicted of estafa in the Court of First Instance of Manila. The Court of Appeals affirmed the verdict.
It appears that, knowing he had no funds therefor, Ang Tek Lian drew on Saturday, November 16, 1946, the check Exhibit A upon the China Banking Corporation for the sum of P4,000, payable to the order of "cash." He delivered it to Lee Hua Hong in exchange for money which the latter handed in the act. On November 18, 1946, the next business day, the check was......

...THE NEGOTIABLE INSTRUMENT LAW
SECTION . 5. Additional provisions not affecting negotiability. - An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable. But the negotiable character of an instrument otherwise negotiable is not affected by a provision which authorizes the sale of collateral securities in case the instrument be not paid at maturity; or
(b) Authorizes a confession of judgment if the instrument be not paid at maturity; or
(c) Waives the benefit of any law intended for the advantage or protection of the obligor; or
(d) Gives the holder an election to require something to be done in lieu of payment of money.
But nothing in this section shall validate any provision or stipulation otherwise illegal.
Acts in addition to payment of money
A negotiable instrument must be payable in “a sum certain in money.”
(1) General Rule. – As a general rule, the instrument is non-negotiable if it contains a promise or order to do any act in addition to the payment of money. (par. 1.) The prohibition is based on the fact that while one could be indorsed, the other would have to be assigned. (see Sec. 30)
EXAMPLES:
“I promise to pay or order P1,000.00 and to deliver a horse.”
(2) Exceptions. – The law, however, gives exceptions (Sec. 5 [a to d.] to the general rule.
a. Sale of collateral securities.
EXAMPLE:
“I promise to pay P or order the sum of P10,000.00 on November......

...1. Negotiable Instruments – written contracts for the payment of money; by its form, intended as a substitute for money and intended to pass from hand to hand, to give the holder in due course the right to hold the same and collect the sum due.
2. Characteristics of Negotiable Instruments:
a. negotiability – right of transferee to hold the instrument and collect the sum due
b. accumulation of secondary contracts – instrument is negotiated from person to person
3. Difference between Negotiable Instruments from Non-Negotiable Instruments:
Negotiable Instruments | Non-negotiable Instruments |
Contains all the requisites of Sec. 1 of the NIL | does not contain all the requisites of Sec. 1 of the NIL |
Transferred by negotiation | transferred by assignment |
Holder in due course may have better rights than transferor | transferee acquires rights only of his transferor |
Prior parties warrant payment | prior parties merely warrant legality of title |
Transferee has right of recourse against intermediate parties | transferee has no right of recourse |
4. Difference between Negotiable Instruments and Negotiable Documents of Title
Negotiable Instruments | Negotiable Documents of Title |
Have requisites of Sec. 1 of the NIL | does not contain requisites of Sec. 1 of NIL |
Have right of recourse against intermediate parties who are secondarily liable | no secondary liability of intermediate parties |
Holder in due course......

...to determine if the
person currently possessing the instrument qualifies as a holder in due
course. The basic definition is found in §3-302(a), which you should read
carefully.
Official Comment 4 to §3-302 makes it clear that the payee can qualify
as a holder in due course in some rare situations. Normally, the payee is
so involved in the underlying transaction that he or she has notice of
problems affecting payment obligations, and thus cannot be a holder in
due course. But the examples given in Official Comment 4 describe fact
patterns where the payee is innocent of such knowledge and can therefore qualify for the protection given to holders in due course. See also
Eldon’s Super Fresh Stores, Inc. v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 296 Minn. 130, 207 N.W.2d 282, 12 U.C.C. Rep. Serv. 490 (1973), for
an example of the payee as a holder in due course.
35
36
3.
Holders in Due Course
Subsection (c) gives a list of extraordinary transactions — creditors
seizing instruments by judicial process, the sale of an inventoried business
(a ‘‘bulk transaction’’), or the appointment of the administrator of an
estate containing negotiable instruments — in which the transferee is
statutorily denied holder in due course status.1
A.
‘‘Holder’’
Note first of all that in order to be a holder in due course the
possessor of the instrument must qualify as a holder. This means that the
instrument must be technically negotiable and must have been technically
negotiated into the......

...Type of Negotiable Instrument
Wiley v. Peoples Bank and Trust Company
Marcus Wiley, James Tate, and James Irby were partners engaged in buying and selling used cars under the trade name Wiley, Tate & Irby. Over an extended period of time, the partnership sold a number of automobiles to Billy Houston, a sole proprietor doing business as Houston Auto Sales (Houston). In connection with each purchase, Houston executed and delivered to the partnership a negotiable instrument drawn on the Peoples Bank and Trust Company of Tupelo, Mississippi. Upon delivery of each negotiable instrument, the automobiles were delivered to Houston. Each of the instruments involved in these transactions contained a number of variations in text and form. However, each of them was similar in that each was drawn on a bank, signed by the maker, and contained an unconditional order to pay a sum certain on the demand of the payee. Wiley v. Peoples Bank and Trust Company, 438 F.2d 513, Web 1971 U.S. App. Lexis 11917 (United States Court of Appeals for the Fifth Circuit)
What type of negotiable instrument is involved in these transactions?
As defined by the Uniform Commercial Code (UCC) negotiable instruments include checks, draft, notes and certificates of deposit. Negotiable instruments must meet certain requirements for transfer. Article 3 of the Uniform Commercial Code states that a negotiable instrument must meet certain requirements. A negotiable instrument should be a substitute for money,......

...Running Head: Negotiable Instruments
Negotiable Instruments
ACC 543
January 9, 2012
This memo attempts to analyze financial decisions problems with creating lines of credit from banks for the purpose of technological infrastructure investments. Explaining negotiable instruments will occur with recommended financing transactions. Comparing the main and secondary liabilities of the parties to the negotiable instruments and examining the parts of the secured transaction the bank recommends. This will be included in the memo. Negotiable instruments are transferable instruments used as a means of money for trading. These instruments are a promise to pay such as checks, drafts, promissory notes, and certificate of deposits. “A negotiable instrument has three principal attributes: (1) an asset or property passes from the transferor to the transferee by mere delivery or endorsement of the instrument, (2) a transferee accepting the instrument in good faith and for value obtains an indefeasible title and may sue on the instrument in his or her name, and (3) a notice of the transfer is not given to the party liable in the instrument. “ (Business Dictionary, 2012)
This business wants to create a line of credit from the bank to invest money in technological infrastructure. A draft can be the negotiable instrument to use with a line of credit. Drafts contain three parties, the drawer, the drawee, and the payee. The drawer creates instructions to demand the......

...Assignment
on
Negotiable Instrument
Course Title: Legal Environment of International
Business
Prepared by: Farha Fatema
Date of Submission: 28/04/2011
Executive Summary
Negotiable instruments are written orders or unconditional promises to pay a fixed sum of money on demand or at a certain time. Promissory notes, bills of exchange, checks, drafts, and certificates of deposit are all examples of negotiable instruments. Negotiable instruments may be transferred from one person to another, who is known as a holder in due course. Upon transfer, also called negotiation of the instrument, the holder in due course obtains full legal title to the instrument. Negotiable instruments may be transferred by delivery or by endorsement and delivery.
One type of negotiable instrument, called a promissory note, involves only two parties, the maker of the note and the payee, or the party to whom the note is payable. With a promissory note, the maker promises to pay a certain amount to the payee. Another type of negotiable instrument, called a bill of exchange, involves three parties. The party who drafts the bill of exchange is known as the drawer. The party who is called on to make payment is known as the drawee, and the party to whom payment is to be made is known as the payee. A check is an example of a bill of exchange, where the individual or business writing the check is the drawer, the bank is the drawee, and the person or......

...time-lapse, SEBI intervened and ordered the refund of the public’s money according to the allotment rules. Sharma refused to refund the money to the investors and appealed against the order to the Finance ministry. He admitted that JVG had exceeded its limits while accepting deposits but claimed that since December 1996 (much before the RBI ban) it had stopped accepting deposits on its own and had even given RBI an undertaking. RBI did not accept the argument and barred the group from accepting any more public deposits.
In September 1997, post-dated cheques issued for principal as well as interest on JVG’s deposits bounced. Investors then complained to the civil courts, consumer courts, Company Law Board and criminal courts under the Negotiable Instruments Act upon which legal proceedings were initiated against the group. The government received a large number of complaints on non-repayment of deposits on maturity by the JVG group. On a complaint filed by the RBI, the Delhi High Court ordered the winding up of the company. The court also appointed an official liquidator and said that the RBI did not consider the revival scheme filed by the company viable. The RBI also filed criminal prosecution petitions in the Metropolitan Magistrates’ Courts in New Delhi.
RBI alleged that the company had accepted deposits worth Rs 88.82 crore which was 756.68% of its net owned fund. This was much higher than the permissible limit of 25%2. Similarly, JVG Leasing had received deposits worth......

...THE LAW ON NEGOTIABLE INSTRUMENTS
Definition of Terms
CHAPTER 1
Form and Interpretation
Section 1. Form of Negotiable Instruments
Commercial Paper – a written promises or obligations that arise out of commercial transactions from the use of such instruments as promissory notes and bills of exchange.
Maker – the person issuing a promissory note
Drawer – person issuing bill of exchange
Money - medium of exchange authorized or adopted by a domestic or foreign government as part of its currency.
In literal sense, the term means “cash.” It also includes all legal tender.
Legal Tender – that currency which a debtor can legally compel a creditor to accept a payment of a debt in money when tendered by the debtor in the right amount.
Non-negotiable Instrument – an instrument which is not negotiable, which does not meet the requirements lay down to qualify an instrument as a negotiable one, or an instrument which in its inception was negotiable but has lost its quality of negotiability.
A non-negotiable instrument may not be negotiated but it may assigned or transferred
Negotiable Promissory Note – an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money or to bearer.
It is commonly referred to as a note.
Payee – the party to whom the promise is made or the instrument is payable.
Bill of exchange – an......